Are You Looking at Your True Service Problems?

Mike Mills

Director of Business Consulting

1. Is your service achieved stronger on suppliers with short or long lead times?

Pick a threshold that fits your industry. Are you hitting higher service on suppliers with longer or shorter lead times? You might be surprised.

In the last several weeks we have asked this question to a number of organizations, and many were surprised to see that their short lead time suppliers were achieving lower service than requested. In several cases, they expected low lead time variation, leaving very little room for late deliveries or short-shipments.

So how about you?  Are you having trouble with your short lead time suppliers? Long lead times? Is the problem delivery time or fill-rate? Pinpoint your problem suppliers and get together to work on a solution.

2. Are you accurately forecasting customer demand on new items?

The question is not ‘Is customer demand difficult to predict on new items?'...the question is 'On which items is market demand the most difficult to predict, and what tools have you created to watch these and make adjustments quickly?'

Remember, you are not forecasting items, you are forecasting the markets desire for these items. You need to see:

  • New item forecast accuracy
  • Daily watch on New Items where the statistical forecast is understated relative to customer demand
  • Service issues on new items
  • New items that are headed for your overstock nightmare report
  • Whether seasonal patterns of customer demand are reflected in the forecast of your new items

Realize that the more you know about your customer, the more likely you can effectively forecast demand on new items. Get in touch with the market and use it your advantage.

3. Is your service achieved stronger on short order cycles or long order cycles?

Yes, this is similar to Question #1. We trust you will find that your longer order cycle lines have higher service attained.

Those short, quick order cycles might feel good in some ways, but they pose a great challenge in maintaining service. They also put much pressure on safety stocks. In addition, they put pressure on all of the components including your forecasts.

Think about it, an item that needs a seasonal profile, and does not have one, is more likely to have problems if the order cycle is 5 - 10 days than if it is longer because you have very little time to react.

4. How many of your items have an Effective Order Cycle longer than the supplier order cycle?

Is your answer 10%, 30%, higher?

How are your economic settings driving your business? You have some items in your lines with too little dollar volume that results in those items NOT being on every order. That is the strategy. We want you to know this. In fact, once you find those items, find out what percent of the inventory they hold.

Perhaps you have 18% of your items with uniquely higher Effective Order Cycles and perhaps they make up only 5% of your inventory...or perhaps it's 20%. We want you to know.

Next, how many of your items have the buying multiple driving your order cycles?

5. What categories of your items are causing the most service pain?

Yes, this is on the path of our new Portfolio Matrix Management approach to your replenishment. For years, we watched companies throw dollars at their problems without truly knowing where the problems were. So, you need to know. What is the service picture for each:

  • Profiled items vs. Non-Profiled
  • New items vs. Non-New
  • Manual Forecasts vs. Non-Manual (last 90 days)
  • Promo items vs. Non-Promo
  • Long lead time lines vs. Short
  • Watch items vs. Non-Watch
  • Low cost items vs. High Cost

This is true inventory management. Become close to the items you buy. Dig in, and find the answers to these very challenging questions. Then, and only then, will the true picture come to light.

Please feel free to reach out to us if you have any questions on these topics.